In Tadros v. City of Chicago Department of Administrative Hearings, 2021 IL App (1st) 200273, the City filed complaints with the Department of Administrative Hearings alleging $56,000 in unpaid water bills for service provided to a property between 2007 and 2017. Legal title to the property was held in a land trust. The beneficiary was an LLC. Gerese Tadros was manager of the LLC and had the power of direction for the trust. The City’s complaint named Tadros, the trust, and Tadros d/b/a 47th and State LLC. The Department’s administrative hearing officer found all three jointly and severally liable for the water bills.

Tadros filed a complaint for administrative review with the circuit court, which reversed the administrative decision as to Tadros’ personal liability and the City appealed. On appeal, the court noted the only issue was whether Tadros, as the LLC’s member/manager could be held personally liable for the debts of the LLC.

The court first reviewed the City’s ordinances. They provided that “the owner or owners of a property, location or address where water or water service is supplied shall be jointly and severally responsible for payment for any water or water service supplied.”  “Owner” was defined in a number of ways, including the legal title holder, the beneficial owner, an executor or guardian, or “any person, including the agent of the legal title holder, who is authorized or entitled to control, manage or dispose of any premises, dwelling or dwelling unit.”

The City argued that Tadros was an owner under the last definition as a person or agent entitled to control or manage the property. Tadros argued that as the manager of the LLC he had no personal liability for the LLC’s debts under the LLC Act.

The LLC Act does provide that an LLC’s debts and liabilities are solely those of the company and that a member or manager is “not personally liable for a debt, obligation or liability of the company solely by reason of being or acting as a member or manager” unless there is a provision to that effect in the articles of the company and the member has consented to the adoption of that provision. However, the LLC Act was recently amended to further state that it does not limit “the personal liability of a member or manager imposed under law other than [the LLC Act], including, but not limited to, agency, contract, and tort law.”

The court interpreted this amendment as creating a distinction between the lack of personal liability for the LLC’s debts as the manager of the company under the LLC Act and the potential personal liability for a manager’s own actions under different laws. In other words, a member or manager of an LLC can be liable for his or her own wrongful acts or omissions if the liability is imposed by a statute other than the LLC Act.

In this case, the court found that Tadros’ liability was not based solely on his status as the manager of the LLC. Rather, he was being held accountable under another law—the City’s ordinance—for his own acts or omissions as an “owner” of the property, as defined in the ordinance. Consequently, the court reversed the trial court and affirmed the administrative decision to impose liability for the water bills on Tadros.

Masiello Real Estate, Inc. v. Mateo, No. 2020257 (Oct. 15, 2021, S. Ct. Vermont), involved a multi-year sequence of listing agreements that ultimately failed to provide a commission to the plaintiff Broker.

The facts of the case 

Defendant Seller in this case owned a 276-acre property in Vermont. Beginning in 2013, Seller agreed to an exclusive listing agreement with Broker with a $435,000 asking price, a $25,000 commission and a one-year “tail” that compelled seller to pay the commission if, within twelve months of the agreement’s expiration, seller sold the property and Broker was the procuring cause. Broker listed the property on several real estate websites.

During the first listing agreement, Broker showed the property several times and received one offer below the asking price, which Seller rejected. They entered into a second agreement in February 2014 with the same terms and one-year tail. Broker did not show the property at all during this period and the agreement expired on January 1, 2015.

In August, 2015, a Massachusetts couple (Mateo and Nelson) contacted Broker expressing interest in buying a property for $250,000 or less. Broker showed them several properties. Nelson recalled seeing the Seller’s property on a website and asked Broker about it. Broker contacted Seller, who agreed to a third listing agreement with a short term of August 25 to September 30, and a one-year tail. Broker showed the property to Mateo. She made no offer and the third listing agreement expired.

Broker contacted Mateo in November 2015 and February 2016. Both times, Mateo said she was not ready to move forward and needed to sell her existing house.

In June of 2016, Mateo wanted to see the Seller’s property again. Broker contacted Seller for a fourth listing agreement but Seller declined, saying he was no longer motivated to sell and would not sign a listing agreement; however, he “will honor you getting paid as a buyer broker, not a selling broker.”  Broker replied that he could not flip fiduciary duties and offered to proceed with negotiations for the original asking price. Seller agreed to consider an offer but would not sign anything but a sales contract. Mateo visited the property but did not make an offer.

In August of 2016, Mateo sent another broker a list of properties she wanted to see while Nelson, having obtained Seller’s contact information from a neighbor, contacted Seller directly. During August and September, Nelson and Seller negotiated a price but no offer was made.

The tail of the third listing agreement between Broker and Seller expired on September 30, 2016.

Between September and November, Mateo and Nelson looked at other properties and made an unsuccessful offer on one. In November, Mateo and Nelson renewed contact directly with Seller, who sold the property to them on January 20, 2017. Broker sued the Seller for a commission, asserting breach of contract and other legal theories.

The court’s analysis 

The court reviewed Broker’s breach of contract claim in two parts—whether Broker was the procuring cause of the sale and whether Seller had been obligated to refer to Broker Nelson’s direct inquiries to Seller during the last tail period.

To be entitled to a commission under Vermont law, a broker must show that he or she procured a purchaser ready, willing, and able to purchase at the price and upon the terms prescribed by the seller. A broker must show more than an “incidental relationship to the resulting sale” and that the broker’s “efforts dominated the transaction.”

In this case, the court held that Broker was clearly not the procuring cause of the sale under this standard. Although Broker did advertise the property, showed it to Mateo, and emailed her several times, he was unable to deliver an offer from her. Even the direct negotiations between Nelson and Seller between August and September 2016 did not conclude with an agreement on price or an offer. Both Nelson and Mateo were actively looking at other properties with another broker from September to November and actually made an offer on one. It was not until a further wave of direct negotiations between Seller and the couple starting in November 2016 (after the last tail had expired) that the property was ultimately sold in January 2017.

The bottom line was that the court appeared to think that there were too many waves of negotiation during which Mateo and Nelson were not prepared to proceed, whether the price was too high or they needed to sell their current home first, followed by successive breaks. The court was not prepared to say that, under the facts, the Broker “procured a purchaser ready, willing and able to purchase at the price and upon the terms prescribed by the seller” or that Broker’s efforts dominated the transaction.

On the second issue, the court found that Seller was not obligated to tell Broker about Nelson’s direct inquiry in August, 2016, prior to the expiration of the last tail. The third listing agreement provided that Seller agreed “to direct all inquiries concerning this property from whatever source to [Broker] during the period of this Agreement.”  Broker argued that “period” must include the tail. The court disagreed. Whether called “term” or “period,” the meaning was clear that Seller’s obligation to refer inquiries was limited to the short term of the third listing agreement, which had expired a year earlier in 2015. It did not include the tail.

The court reasoned that such an interpretation made sense because after the third listing agreement expired, Seller was free to enter into an exclusive agreement with a different broker. If the obligation to refer inquiries to Broker continued through the third listing agreement’s tail, Seller would then have had simultaneous obligations to refer all inquiries to both Broker and the subsequent broker, an anomalous result. The court said, “the tail was intended to compensate broker for his actions during the contract period in procuring a sale that arises after the term of the contract, not that seller was barred from engaging other brokers or buyers after the contract term.”  Because the first direct email from Nelson was in August, 2016 (outside the term of the third listing agreement), Seller had no obligation to direct the inquiry to Broker.

The court affirmed judgment in favor of the Seller on the Broker’s breach of contract claim.

In Sweitzer Properties, LLC v. Davis, 2021 IL App (1st) 191974-U, plaintiff Sweitzer Properties leased a house to the Davises for two years at $4,200 per month. The Davises moved in and one month later moved out. Sweitzer Properties sued the Davises for breach of the lease. The Davises countersued for constructive eviction.

The Davises told the owner of Sweitzer Properties, Rick Sweitzer, during negotiations for the lease that they needed a safe and healthy home for their small children, one of whom had had open heart surgery. As soon as they moved in, the Davises noticed fast-growing mold in the basement and evidence of a mouse infestation throughout the house. They sent photos and complained to Rick to no avail. Concluding that the conditions of the house were untenable for their family, the Davises moved out.

At trial, the evidence showed that the prior tenants had informed Rick about water damage and mold in the basement, which Rick had repaired with new drywall and a vent. Rick knew of the Davises’ special needs for a clean house and assured them that it was suitable for their purposes. When informed of the mold and mouse problems, he told the Davises that the mold could be removed with bleach and did not seem concerned about the mice. Sweitzer Properties had at least two weeks to remediate both problems and did nothing in that time to make the house conform to the representations Rick made to induce the Davises to sign the lease.

The trial court held the Davises at fault for not closely inspecting the property before committing to a lease. It relied on the doctrine of caveat lessee and placed on the tenants the entire burden of finding out whether Rick had misrepresented the actual state of the property prior to signing the lease. The court ruled in favor of Sweitzer Properties and awarded it $96,000 in future rent and penalties. The Davises appealed.

The appellate court held the trial court’s total reliance on the doctrine of caveat lessee was simply wrong. The Illinois Supreme Court rejected that doctrine in 1972 and reiterated its rejection in 1999. Citing an imbalance in modern landlord-tenant relationships, the court noted that tenants have far less bargaining power and capacity to inspect and maintain premises than landlords. An implied warranty of habitability is now applicable against a lessor where latent defects interfere with the inhabitants’ reasonable expectation that a unit will be suitable for habitation. This implied warranty of habitability is more in line with consumer protection cases and is appropriate to impose on a landlord who “sells housing as a commercial businessman and has much greater opportunity, incentive, and capacity to inspect and maintain the condition of his building.”

Sweitzer Properties knew the Davises had special needs for a clean, healthy home. Failure to remediate the problems promptly amounted to constructive eviction. Accordingly, the court reversed the trial court’s judgment in favor of the Sweitzer Properties.

The court declined to remand the case back to the trial court and instead issued a judgment in favor of the Davises with damages for constructive eviction.

In Hemmingway v. Illinois Human Rights Commisssion, 2021 IL App (1st) 200880U, a condominium owner with a disability sued her association and the property management company, claiming that they retaliated against her because she pursued discrimination complaints against them.

The Illinois Human Rights Act secures for individuals the right to be free from unlawful discrimination. In part, the Act prohibits individuals from being discriminated against due to a disability in connection with real estate transactions and it prohibits retaliation against individuals who engage in protected activities, such as filing claims for discrimination.

When a charge is filed with the Department of Human Rights, the Department must investigate to determine whether there is substantial evidence that a civil rights violation has occurred. The Act defines “substantial evidence” as “evidence which a reasonable mind accepts as sufficient to support a particular conclusion and which consists of more than a mere scintilla but may be somewhat less than a preponderance.”  An adverse decision by the Department may be reviewed by the Human Rights Commission. Dismissal by the Commission may be appealed directly to the appellate court.

In this case the appellate court sustained the dismissal by the Commission for lack of substantial evidence the defendants committed any retaliatory acts against the plaintiff. Specifically, plaintiff claimed the defendants retaliated against her for filing a discrimination charge by pursuing an order for possession for failing to pay certain fines and assessments. The investigation showed that the order for possession was filed prior to her first discrimination charge and could not have been in retaliation.

Further, plaintiff claimed the defendant association and the property management firm retaliated by subjecting her to different terms and conditions than other unit owners. Specifically, plaintiff asserted that she received a warning letter about an insurance violation, but no other owners received one. In fact, 20 other unit owners received warning letters that gave everyone two weeks to comply. Finally, plaintiff claimed that the defendants paid for garage repairs to other owners but refused to pay for her repairs. The facts uncovered that the association purchased twelve new garage doors around 2005, which was too remote to substantiate a discrimination claim made in 2015. The defendants did pay for repairs on one unit owner’s garage door on an emergency basis because of security concerns, but he reimbursed the defendants for the cost.

In sum, the plaintiff failed to demonstrate causation between the defendants’ actions and her filing of discrimination claims. The court affirmed the Commission’s dismissal of plaintiff’s claims.

In Frieder v. Classic Realty Advisors Inc., 2021 IL App (1st) 201392U, the plaintiff filed suit on April 17, 2019, against defendants Classic Realty Advisors, Inc. and its president for unpaid commissions under the Wage Payment and Collection Act and for breach of contract. Defendants filed their appearance through their attorney and filed answers, affirmative defenses, and counterclaims on May 29, 2019, asserting that plaintiff was an independent contractor and not an employee under the Wage Act; that they had already paid the commissions due; that it was plaintiff who had breached his contract; and that they had a claim for set-off for monies paid to him and on his behalf.

Nothing further happened in the case until February 18, 2020, when the defendants’ attorney withdrew from the case and the court ordered the defendants to retain another attorney and appear in court by March 10. The COVID‑19 pandemic was of concern in the United States at that time and Governor Pritzker issued a disaster declaration on March 12 and a quarantine order for the State the next day. The following day the county court suspended most civil proceedings and did not resume until July, when the plaintiff quickly filed a motion for a default judgment. The court granted the motion because the defendants had not appeared or retained another attorney.

By September of 2020, defendants had a new attorney who filed a petition to vacate the default judgment. The defendants cited their difficulty in obtaining replacement counsel due to the COVID‑19 pandemic and lack of notice of the default judgment proceedings.

Relief from an order vacating a default judgment requires proof by a preponderance of the evidence of a meritorious claim or defense in the original action and of due diligence in pursuing both the original action and the petition to vacate the judgment. Due diligence requires the petitioner to have a reasonable excuse for failing to act within the appropriate time and that, under the circumstances, the petitioner acted reasonably and not negligently.

In this case, the appellate court found that the Governor’s quarantine orders caused most businesses to close and the civil court system to be suspended. Defendants asserted that they were unaware of the default proceedings, which the court accepted. Notices of the default proceedings were served by mail to defendants’ place of business and were likely not received until much later when they returned to their office. Further, defendants claimed they were unable to obtain new counsel because businesses were closed due to the pandemic. They argued they had been diligent before the pandemic in filing their answer and counterclaims.

The court found all of these assertions reasonable. It affirmed the trial court’s decision to set aside the default judgment “based upon substantial principles of right and wrong” and in the interest of prevention of injury and furtherance of justice.